Permanent salaries rise at fastest rate since December 2007

The Recruitment and Employment Confederation (REC) and KPMG Report on Jobs was published today.

The report provides the most comprehensive guide to the UK labour market, drawing on original survey data provided by recruitment consultancies.

Staff appointments continue to grow strongly...

Recruitment consultants signalled further increases in both permanent placements and temp billings during October. Although easing marginally since September, the rates of expansion remained considerable.

...supported by sharp rise in vacancies

Overall demand for staff rose at the fastest pace since June 2007. Higher vacancy levels were signalled for both permanent and temporary workers, in both the public and private sectors and across all monitored job categories.

Permanent salary inflation accelerates...

Starting salaries for successful permanent candidates rose further in October, with the rate of increase accelerating to the strongest since December 2007. Temp pay rates also rose, albeit at the slowest pace in four months.

...amid growing shortages of qualified candidates

Steeper falls in both permanent and temporary staff availability were reported in October, with the rates of decline the sharpest in around six years.

Regional and sector variation

All four monitored English regions saw higher permanent placements. The strongest growth was recorded in the Midlands, while the slowest expansion was indicated in London.

The Midlands continued to post the strongest temp jobs growth during the latest survey period, while the South registered the slowest rise.

Private sector vacancies continued to rise at a faster pace than public sector roles in the latest survey period.

In the private sector, permanent staff saw stronger demand growth than temporary/contract workers, while in the public sector the reverse was true.

All nine types of permanent staff monitored by the survey saw improved levels of demand for staff during October. The strongest growth was signalled for engineering workers, followed by construction staff and then IT & computing employees.

Higher demand was broad-based across all nine types of temporary/contract staff in October. Mirroring the trend signalled for permanent employees, the most sought-after category was Engineering. The slowest growth was recorded in the Executive/Professional category.

REC CEO Kevin Green commented, “This is another month of growth for both temporary and permanent jobs, in all regions, in all sectors and now across both the private, and public sectors. The real good news for workers is that starting salaries have risen at the sharpest rate in 6 years - however this is the result of a six year low in the availability of staff to fill the number of jobs available. The skills shortage shows no signs of abating and although it is starting to drive wages up there is a real danger that it could cause serious damage to future economic growth in the UK.

“Recruiters are also telling us that the hiring process is starting to pick up speed as employer confidence returns, which should lead to greater fluidity returning to the jobs market and greater opportunities for those looking to enter the jobs market or make the next step up in their career.”

Bernard Brown, partner and head of business services at KPMG, commented, “For those who have set government policy the latest figures are great news, with higher numbers of job opportunities emerging alongside the sharpest increase in permanent wages for 6 years, as demand continues to strengthen. Whilst this is a sure sign of economic recovery, we must not get complacent because, in the higher earning bracket, left unchecked wage inflation will bring different challenges to businesses who strive for profitable growth.

“Another question that must be addressed revolves around whether increasing salaries are enough to entice job hunters to move between organisations. All the evidence suggests not, with permanent and temporary staff availability falling in recent months. It means employers cannot rely on wages alone as a hook to attract top talent. The time has come for them to develop a raft of offers as part of the overall remuneration package. If they fail to do so, they will struggle to recruit and bring their organisation back to pre-downturn levels.”

Andrew Hunter, co-founder of Adzuna, said, “The UK labour market is turning a corner. Adzuna data shows that salaries in September picked up for the second consecutive month, with the average advertised salary currently standing at &pound34,005 per annum, up 0.6% from August. Around the country, advertised salaries have improved on average by 1.2% between May to October, but London is leading the charge with a 1.6% increase over this period. Certain sectors are performing more strongly than others, with IT, Engineering and Construction jobs seeing the biggest wage improvements over the last 12 months, with annual rises of 6.9%, 3.2% and 3.1% respectively.

“However, salary growth still tracks well below the rate of inflation, with the average annual pay-packet devalued by &pound1,020 in real terms over the past year. The fall in real wages remains a black spot on an otherwise optimistic picture. It’s great to see salary increases, but there is still a way to go before this will close the gap of inflation, which has been outpacing wage growth since before the financial crisis.”